Britain’s financial industry is ready to transform itself

Follow the author of this article

Follow the topics within this article

Successful delivery of the vision will boost innovation across the UK, including in the West Midlands

The UK is recognised across the world as the leading international financial centre. It is also a national asset. Its status has been built up over hundreds of years and retained by its ability to face up to big challenges and adapt to change. The rise of the US, the end of the Empire, the Big Bang and the birth of the euro to name just a few.

In the face of such significant change, the industry must again do what it has managed so well before: adapt and transform. This is precisely what TheCityUK has been focused on and commissioned PwC to explore. The findings were clear. The industry is willing and ready to transform and renew itself: to develop new markets, to rebuild its relationship with customers and embrace the technological revolution.

This success story doesn’t just benefit those who work within it, it translates into money for the economy and jobs right across the country. In fact it contributed £71bn in tax in 2015 and more than two in three industry jobs are outside London. The industry is fundamentally important to the UK, facilitating people’s everyday lives and providing services that keep businesses working.

It helps people to buy a home of their own, to invest in their business, provide security in old age and to manage risk, generating economic security and growth.

But, the continued success of what is arguably the country’s most important industry is not guaranteed. The world is changing at an unprecedented rate.

The industry helps people to buy a home, to invest in their business and provide security in old age

New technologies are raising expectations and changing the way we live, demographic trends are altering the shape of communities and the global balance of economic power is shifting to emerging markets. The industry itself also has a long way to go to regain the trust of the public. The lens of Brexit magnifies many of these challenges, but also presents opportunities to pursue an independent trade and investment policy based on UK interests. The industry needs to adapt or it will be left behind.

To realise this transformation, our report sets out a clear road map for change beyond Brexit to 2025. It is a vision for the role that the industry can play in making possible the country’s long-term success outside the EU, building on its already strong foundations. Its recommendations are bold. Its implementation will see an industry that remains world-class. It will be innovative and highly digitised, a leader in cyber security and provide more tailored and better products and services.

It will continue to be world-leading in fintech and retain its full ecosystem of financial and related professional services. And while London will remain one of the most important centres, cities across the rest of the UK will be more prominent with greater specialities and a strong supply of domestic talent with relevant skills. We must also have a visa regime that support the industry’s need for continued access to global talent.

The benefits will be tangible and felt right across the UK. Successful delivery of the vision will boost innovation, export competitiveness and efficiency and see the industry contribute an additional £16bn, or 9pc, in GVA in 2025, compared to the current scenario.

Around 70pc of this would come from cities outside of London, with the fastest growing areas expected to be my home region the North East, Northern Ireland, the West Midlands and Yorkshire and the Humber.

While responsibility for the industry’s transformation is its own, and it absolutely needs to deliver on its commitment to change, it will need a more strategic and effective partnership with government and the regulators to deliver the full benefits of this vision.

Regulators and policymakers must continue to lead the development of an open and compatible global financial system. Regulation must be at least as strong as global standards, proportionate and internationally attractive. As with legal certainty, the tax regime must be stable and be renowned for being so.

There is much work to be done. While London and New York are consistently ranked well ahead of other global financial centres, competition is rapidly increasing. Particularly from emerging Asian centres.

Of course, Brexit is the most immediate issue in hand to manage and getting the best possible deal for the UK and the EU is critical. But there are other challenges that existed before Brexit which pose both challenges and opportunities for the industry and the country into the future. We must tackle them head on.

The financial and related professional services industry can remain an important contributor to the country’s economy and retain its position as the leading global financial centre, but only by transforming itself. The vision is there. We now need the commitment for its delivery and the support of government and the regulators to see it through.